Target-date mutual funds stumble in second quarter

Target-date funds lost their first-quarter momentum in the second quarter. (Susana Gonzalez / Bloomberg)

The appeal of target-date mutual funds is their exposure to so many parts of the financial markets. It's also what caused target funds to lose money in the second quarter.

The average target fund lost 2.8% from April to June, dragged down by the nearly 7% loss in their non-U.S. stock holdings, according to Ibbotson Associates. That was a reversal from their 9% rally in the first quarter.

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Target funds are now down over the past 12 months, with the average fund off 0.5%. That's also driven by non-U.S. equities, which have slid more than 13% in that period.

The poor performance didn't hurt asset flows, however. A "very strong" $13.9 billion poured into the sector, pushing total assets to $431.5 billion, according to Ibbotson.

Fidelity, Vanguard and T. Rowe Price continue to dominate with about three-quarters of all target assets. But other firms such as Pimco and BlackRock made solid progress. Pimco's total assets rose 12.8% to $298 million.